What is the real Living Wage?
The national Living Wage (‘NLW’) and the national Minimum Wage (‘NMW’) are rates of pay that must be paid, by law, to all employees over school leaving age. The national Living Wage applies to all employees over 23 years of age.
The real Living Wage in the UK, in contrast, is a non-legally binding wage that’s based on the cost of living. The real Living Wage is voluntarily paid by 15,000 employers in the UK. It aims to be a wage that meets employees everyday needs, covering workers’ realistic cost of living. Employers who pay the real Living Wage in the UK are deemed to go ‘above and beyond’ for their employees.
When did the real Living Wage UK come into effect?
The National Minimal Wage Act received Royal Assent on 31st July 1998 and passed into Law under the Labour Government, taking effect on 1st April 1999. It was seen as an implementation of one of the Labour Party’s flagship policies from the 1997 General Election campaign. It sought to introduce a minimum wage across the UK, in an effort to combat poverty.
Upon implementation in 1999, the national Minimal Wage was £3.60 per hour for employees over 22 years of age and £3.00 for those under 22. The national Minimum Wage increased annually on 1st October each year, reaching £6.70 for employees over 21 years of age by October 2015.
On 1st April 2016, the national Living Wage was introduced and applied to all employees over 25 years of age. This age limit has now been reduced to employees over 21 years old. In 2016, the national Living Wage was £7.20 and has seen sustained increase to the figure of £11.44 per hour which applied from 1st April 2024. The national Living Wage increases annually in April.
The real Living Wage was introduced in April 2016. Employers can voluntarily pay the real Living Wage to their employees.
Why was the real Living Wage introduced?
The real Living Wage is overseen by the Living Wage Commission. The Commission, set up in January 2016, oversees the calculation of living wage rates in the UK. The aim of the Living Wage Commission is to produce realistic, sustainable and robust rates of pay that accurately reflect the cost of living. Rates of pay are calculated both for London, where prices are higher, and the rest of the UK.
How much is the national Living Wage and the real Living Wage?
The national Living Wage is currently £11.44 for employees 21 years of age and over.
How much is the real Living Wage in the UK in 2024?
The real Living Wage 2024 is £12 per hour across the UK and the London living wage is £13.15 per hour. The real Living Wage Scotland is the same as the rest of the UK.
The real Living Wage increases annually, announced usually by the Living Wage Commission in November, with employers having six months to implement the real Living Wage increase for their employees.
What’s the difference between the national Living Wage and the real Living Wage?
Calculated on the cost of living – the real Living Wage UK is calculated by an independent body and is based on the cost of living. London weighting is applied because of the extra costs associated with living and working in the capital. In contrast, the national Living Wage is a percentage of average earnings, with no London weighting.
Age – the real Living Wage is a wage for all employees over the age of 18. There are no age bands as with the national Living Wage. The national Living Wage applies only to employees aged 21 or over.
Voluntary - the real Living Wage UK is voluntary, whereas the national Living Wage is mandated by law. Employers who pay the real Living Wage are seen as going above and beyond the Government minimums. This helps to ensure that their employees are paid a wage that covers the cost of living which improves financial wellness. Financial wellness reduces the risk of employee stress and absenteeism.
Independent – the real Living Wage UK is calculated using real data on the cost of living. The rate is updated annually in November. Employers are encouraged to implement the new rates as soon as possible after the rates have been published.
What does the real Living Wage mean for employees?
The Living Wage movement started almost 20 years ago. Organisations such as the Joseph Rowntree Foundation were instrumental in propelling the movement into the public eye. The Living Wage Foundation was created to accredit and recognise employers who pay the real Living Wage. The Living Wage Foundation awards the Living Wage Employer Mark to accredited companies.
They also offer a Service Provider Recognition Scheme for third party contractors. This is awarded to companies who make sure their own staff earn the real Living Wage. Companies must also make sure there is a Living Wage option when submitting tenders.
Since the start of the real Living Wage movement, an extra £1.6 billion has been paid by employers. Since the start of the Covid-19 pandemic in early 2020, £613 million in extra wages has gone to low-paid workers.
What does the real Living Wage mean for employers?
Paying the real Living Wage is positive from a reputational and recruitment standpoint. It demonstrates that employers value their employees and support their financial wellbeing. In 2017, The Living Wage Foundation carried out a survey of member businesses in conjunction with Cardiff Business School. 93% of responders said they had benefitted since becoming real Living Wage employers.
Over 85% of responders said their reputation had been enhanced by being accredited as a real Living Wage employer. They also said their relationship with their employees had improved. 75% of responders recognised an increase in workforce motivation and improved employee retention rates.
15,000 UK employers are accredited as real Living Wage employers. A list of accredited real Living Wage employers can be found here.
How does PayCaptain help?
Not only is PayCaptain proud to be an accredited real Living Wage employer, but PayCaptain can also help companies who are wishing to sign up to this voluntary payroll movement for the benefit of their employees. Calculations are built into PayCaptain's HMRC recognised payroll solution which makes transitioning employees to a real Living Wage seamless. Businesses can also benefit from automatic updates to employees’ wages by the calculations that are built into AI powered payroll. This reduces overhead and administration time for companies wishing to transition to the real Living Wage UK.
PayCaptain can also create and run detailed payroll reports so employers can ensure all their employers are being paid in accordance with the voluntary payroll movement. When real Living Wage pay increases come into effect annually, employees are notified on their online payslips and through the PayCaptain mobile payroll app, giving them real visibility of the additional money they'll have in their pockets. When pay increases come into effect, innovative payroll saving software like SmartPay can nudge employees into healthier savings habits, leading them into a 'save first, spend later' mindset for a healthier financial future.
To learn more about how we can help your business, please contact us for an informal, no obligation chat. We’ll be happy to demo PayCaptain for you and talk about how we can help you build for a better future, both for your employees and your business.
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